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Rediff.com  » Business » Rubber Board wants futures reined in

Rubber Board wants futures reined in

April 03, 2007 14:11 IST

Futures trading in rubber has become a major worry for the Rubber Board and farmers in India.

The situation has forced the Rubber Board to call a meeting of all parties concerned to find out a solution to the problem.

Addressing the meeting, Rubber Board chairman Sajen Peter said variation in prices of rubber futures beyond a point is unfair.

He said norms to limit maximum variations in daily prices should be included in futures contract.

The chairman further added that the board had been monitoring variations in rubber prices, which do not tally with the usual explanations issued during the last few days.

Prices had shot up during the peak production season beyond global levels and the board had issued a warning. To justify the warning, prices started declining even during the low production months.

Futures trading has created a situation wherein those who do not genuinely require the commodity could influence the market. It has also to be ensured that futures have more advantages than disadvantages. The chairman invited views and suggestions of all concerned in this matter.

Kailash Gupta, representing the National Multi-Commodity Exchange, informed the gathering that the fluctuations had already drawn their attention and therefore, instructions had been issued that the daily variations should not go beyond 6 per cent. It is to be further examined whether 6 per cent itself was high and for this statistics regarding variations in real trading during the past should be collected.

Of the total contracts, real transactions were only 1.6 per cent in futures, said Dr M C George of Infam.

Futures trading may not be advantageous for the rubber sector, according to A Jacob of Velimala Rubber Company. The consensus arrived at was that fluctuations in futures should be restricted to 2-3 per cent a day.

The fluctuations in futures considerably affect the dealers, especially small traders, said George Valey, president, Indian Rubber Dealers Federation.

N Radhakrishnan, president, Kochi Merchants Association, Satish Abraham, president, Latex Producers Association, Thomaskutty, All India Rubber Industries Association, were of the view that there were various issues that required attention in rubber trading.

Futures being a reality, the board's intervention was essential for their smooth and transparent functioning for the benefit of all, said D Ravindran, secretary-general of the Automotive Tyre Manufacturers Association.

Commodity Online